Dollar Firms on Safe Haven Demand amid Wall Street Rout

Dollar Firms on Safe Haven Demand amid Wall Street Rout


Major US indices ended lower for the second consecutive day with Dow Jones Industrial Average and S&P500 turning negative for the year. The rising interest rates, signs of a global economic slowdown, and the trade tensions are fueling the plunge in the stock market that started in October. The Dow Jones Industrial Average futures lost 2.4% to a three-week low of 24418, the S&P500 futures dropped 2.1% to 2638, and the Nasdaq futures fell 2.1% to 6523, the lowest close in seven months. "FAANG" started yesterday's session lower, but the group of stocks managed to recover from the red territory ahead of the closing bell which supported US stock futures to bounce from the lows during the Asian session.


The dollar index which measures the greenback against a basket of major currencies gained 0.6% to 96.82. DXY rebounded from a two-week low of 96.04 as investors were seen fleeing their risky positions and rushing to the dollar safety. Investors believe that the woes of a global economic slowdown would increase the flow to safe currencies such as the dollar and the Japanese yen. The dollar was lower against major currencies for the past couple of days as Fed Vice-Chairman hinted that interest rates are approaching their neutral levels. However, the interest rate gap between the United States and its rivals could provide support to the US dollar in the short term. The EURUSD lost 0.7% to $1.1369, and the GBPUSD fell 0.5% to $1.2786.


Metal prices faltered as the United States dollar and Treasury yields recovered. The gold ounce retreated from a two-week high of $1229 to settle 0.2% lower at $1221, and the silver ounce lost 0.8% to $14.29.


Oil prices tumbled more than six percent amid rising supply and weakening global economic activity. The signs of a global economic slowdown are hinting that the demand for oil will drop through 2019 while production is likely to continue higher. The International Energy Agency expects the US oil production to exceed 12 million barrels in 2019. The West Texas Intermediate crude futures fell 7% to $53.35, and the Brent futures lost 6.8% to $62.36. Oil prices bounced off their lows as the American Petroleum Institute reported that the weekly US oil stock fell by 1.5 million barrels to 439.2 million barrels last week. Market participants await the official numbers from the Energy Information Administration later today.

Major Economic Events

GMT Country Event Expectation Previous
13:30 US Core Durable Goods Orders (MoM) (Oct) 0.4% 0.1%
13:30 US Initial Jobless Claims 215 216
15:00 US Existing Home Sales (Oct) 5.20 5.15
15:30 US Crude Oil Inventories 2.500 10.270


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